RAM Ratings reaffirms AAA debt ratings of Telekom and Hijrah Pertama

Published on 16 May 2013

RAM Ratings has reaffirmed the AAA long term ratings of Telekom Malaysia Berhad’s (“TM” or “the Group”) and Hijrah Pertama Berhad’s (“HP”) debt issues. TM’s ratings consider its strategic and prominent position within Malaysia’s telecommunications industry as well as its stable earnings and healthy debt-servicing capacity. Based on RAM’s rating methodology on government-linked entities, TM’s position is further solidified by the high likelihood of extraordinary government support in the event of financial distress. Given the back-to-back arrangement between TM and HP - whereby TM remains the legal obligor for HP’s Islamic Stapled Income Securities (“ISIS”) - the rating of the ISIS reflects that of the Group.

Instrument	Rating Action	Rating
Telekom Malaysia Berhad
Islamic Commercial Papers Programme and Islamic  Medium-Term Notes Programme with a combined  aggregate nominal value of up to RM2 billion  (2011/2026)	Reaffirmed	AAA/Stable/P1
Hijrah Pertama Berhad
RM2,925 million Islamic Stapled Income Securities  (2007/2018)	Reaffirmed	AAA/Stable/-

TM has maintained its leadership in the domestic fixed-line telephony sector, commanding 98% of the nation’s subscriber base. In 2008, the Government’s move to assign the nationwide deployment of the high-speed broadband network to TM rendered the Group the sole owner of the infrastructure, further strengthening its position in the fixed-broadband market.

Looking ahead, we expect TM’s broadband subscriber base to continue expanding steadily given its reliable connectivity and the nation’s penetration rate of 28.6% for household fixed broadband (end-2011: 24.5%). However, we also note that the broadband arena is becoming increasingly competitive amid the aggressive marketing efforts and constant initiatives of providers of wireless broadband services, in a bid to increase their coverage. In addition, the introduction of Long- Term Evolution this year could breathe new life into the wireless-broadband market. Despite this, TM still enjoyed commendable take-up for its broadband services last year, with a 7.4% y-o-y increase in its subscriber base to 2.01 million customers as at end-2012. This had in turn strengthened its data revenue, which will continue to skew the Group’s top-line mix from voice to non-voice services.

Media contact
Chinthamani Thanneermalai
(603) 7628 1013
chinthamani@ram.com.my